The stock market is retesting its June lows. It may head lower, or it may bounce from here. While the data most likely suggests a push lower, we’re starting to see some companies get so oversold that they’re looking like attractive long-term buys amid this latest dip.
Investors who buy now may have to deal with some volatility, but given the steep discounts to last year’s highs, it’s clear that buyers today can make big returns when markets get bullish again.
Many chip plays are in oversold territory. They’re seeing demand growth despite a slowing economy. And they’re taking a beating, even as their fundamentals remain solid.
One such play is Micron Technology (MU). The memory chip maker has shed a third of its value in the past year, even with a 51 percent jump in earnings. Today, the stock looks too cheap even to analysts at under 6 times earnings.
Action to take: Shares are worth accumulating here in the low $50 range, as they’ll likely stay around here for the next few months as markets continue to trend lower. At present, shares yield just under 1 percent for an added return right now.
For traders, the March $65 calls, last going for about $2.20, offer mid-double-digit returns in the coming months. They may get a bit cheaper in the coming weeks, so look to buy on a down day for the stock, and potentially flip part of the position on a big rally day to take advantage of today’s market.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.